How To Decrease Your Loan Balance Quickly 

Borrowing student loans can help finance your education, but it also means that you will have to pay back the loan with interest. When you borrow money, the amount you owe is referred to as your loan balance. As interest accrues on your loan, your total loan balance will increase. In this article, we will discuss the factors that can increase your total loan balance.

Factors that can increase your total loan balance

There are several factors that can cause your total loan balance to increase over time. These include:

Accrued Interest

The interest on your student loans starts accruing as soon as you receive the funds, even while you are still in school. The interest accrues daily and is added to your loan balance at the end of each billing cycle. This means that even if you make your monthly payments on time, your loan balance may still increase due to the accrued interest.

Late Payments

Late payments can also increase your total loan balance. If you miss a payment, you may be charged a late fee, which is added to your loan balance. Additionally, if you do not make up the missed payment, the interest on the outstanding balance will continue to accrue, causing your total loan balance to increase.


Some student loans come with additional fees, such as origination fees, which are charged when the loan is first disbursed. These fees are added to your loan balance and accrue interest over time.


Capitalization occurs when the interest that has accrued on your loan is added to the principal balance of your loan. This means that interest will then accrue on the new, higher balance, causing your total loan balance to increase. Capitalization can occur after periods of forbearance or deferment or when you switch to a different repayment plan.

Tips for Increasing Your Loan Credibility

When you apply for a loan, your credibility plays an essential role in determining whether your application will be approved or rejected. Here are some tips that can help you increase your loan credibility:

1. Check your credit report

Your credit report is one of the most important factors that lenders consider when evaluating your loan application. It contains information about your credit history, including your credit score, payment history, outstanding debts, and other financial information. Check your credit report regularly and make sure it is accurate.

2. Improve your credit score

Your credit score is a three-digit number that summarizes your creditworthiness. A higher credit score indicates that you are more likely to repay your debts on time. You can improve your credit score by:

  • Paying your bills on time
  • Keeping your credit card balances low
  • Avoiding opening new credit accounts frequently
  • Disputing errors on your credit report

3. Show stable employment and income

Lenders want to ensure that you have a stable source of income to repay your loan. They will also look at your employment history to determine your stability. Some ways to show stable employment and income include:

  • Providing proof of your employment and income
  • Staying in the same job for an extended period
  • Having a high salary or consistent income

4. Reduce your debt-to-income ratio

Your debt-to-income ratio is the percentage of your income that goes toward paying your debts. Lenders prefer borrowers with a lower debt-to-income ratio because it indicates that you have more disposable income to repay your loan. You can reduce your debt-to-income ratio by:

  • Paying off outstanding debts
  • Increasing your income
  • Avoiding taking on new debts

5. Provide collateral or a co-signer

Providing collateral or a co-signer can increase your loan credibility because it provides additional security for the lender. Collateral is an asset that you pledge as security for the loan, while a co-signer is someone who agrees to repay the loan if you are unable to. However, keep in mind that providing collateral or a co-signer can also increase your risk if you are unable to repay the loan.

How To Decrease Your Loan Balance Quickly 

Any loan balance that is paid off promptly will enable you to save money, and being debt-free can improve your financial situation and increase your freedom. Here are some tips to help you quickly pay off your loan balance:

Pay More Than the Minimum Amount Due

A practical strategy to lower your loan balance is to pay more than the minimum amount required each month, if at all possible. Even a small increase in monthly payments can make that loan sum disappear more quickly.

Pay Your Loan Early

The payback procedure might be sped up by making some additional installments. But, keep in mind that some lenders have prepayment penalties; therefore, before making any more payments, make sure you are aware of them.

Consolidate or Refinance Existing Loans

Debt consolidation or refinancing can also help hasten repayment. Refinancing is done with a single loan, whereas debt consolidation is done with several loans. In order to complete this process, you will need to take out a new loan. The new loan should have more manageable payback terms and lower interest rates.


In summary, your total loan balance can increase for a variety of reasons, including accrued interest, late payments, fees, and capitalization. It is important to understand the factors that can impact your loan balance and to stay on top of your payments to avoid unnecessary increases in your debt. If you are struggling to make your payments, consider exploring repayment options such as income-driven repayment plans or deferment/forbearance to help manage your loan balance.

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